It is the end of an unprecedented week in trade that roiled financial markets and challenged businesses trying to assess the impacts on their supply chains.
One week ago, on April 5, 10% additional “reciprocal” tariffs took effect against goods of nearly all countries. On Tuesday April 8, on the eve of the effective date of the additional country-specific “reciprocal” tariffs announced on April 2, and in response to Chinese retaliatory tariffs, President Trump increased the planned tariff rate against products of China from 34% to 84% by issuing Amendment to Reciprocal Tariffs and Updated Duties as Applied to Low-Value Imports From the People’s Republic of China. A day later, in response to further Chinese retaliation, the President issued an Executive Order Modifying Reciprocal Tariff Rates To Reflect Trading Partner Retaliation And Alignment. This order increased the rate applicable to Chinese goods to 125%, which, it is important to understand, applies in addition to the 20% tariffs the President imposed on Chinese goods earlier this year due to concerns about fentanyl, and in addition to any applicable Section 301 duties, and ordinary duties. As a result, the duty rate on Chinese products now ranges from 145% to nearly 250%. At the same time, as was reported, President Trump hit pause on the trade war, announcing a pause of all the country-specific additional “reciprocal” tariffs for 90 days. It is important to understand that despite the pause, the now so-called “baseline” tariff of 10% remains applicable to goods from nearly all trading partners, at least through July 9 according to the order. The Administration is now reportedly working to reach trade agreements with many different countries.
To cap off the week, on Friday the White House issued a memorandum clarifying exceptions under EO 14257. It was widely reported as establishing exemptions for smartphones and other electronics products from Chinese tariffs. The memorandum recounts how the original reciprocal tariffs order exempted “semiconductors,” and then provides a list of tariff headings and subheadings that are included in the meaning of “semiconductors,” such as HTSUS subheading 8517.13.00, which covers smartphones, and heading 8471, which covers computers. This list of exempt tariff classifications, many of which were not included in the original Annex II list of exempt articles, captures a fairly wide swath of goods. Importers should consider this now expanded list of exemptions, as well as the Annex II exemptions, and other potential exemptions such as those applicable to steel and aluminum products, automobiles and automotive parts, copper, lumber, and pharmaceuticals.
And, speaking of pharmaceuticals, amidst all the activity of the week, the President also found time to remind industry of his threated tariffs against pharmaceuticals saying, “major” pharmaceutical tariffs are on the way. It is hard to imagine a more interesting week in trade than we just had, but we are standing by.
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